# MIS. GUJARAT BOTTLING COMPANY LTD. AND ORS v. THE COCA COLA CO. AND ORS

- **Citation:** [1995] Supp. 2 S.C.R. 514
- **Court:** Supreme Court of India
- **Decided:** 1995-08-04
- **Case number:** Civil Appeal Nos. 6839-40 of 1995
- **Bench:** S.C. Agrawal Ands. Saghir Ahmad
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-gujarat-bottling-company-ltd-and-ors-v-the-coca-cola-co-and-ors-13148
- **Pages:** 42

## Headnote

Trade and Merchandise Marks Act/Trade and Merchandise Marks
Rules 1958-Section 49/Rule 83-Trade Mark-Registration ofuser-Statut01y
requirement~Implications of Common law-Licensing-Restriction on
C
usage.
Indian Contract Act, Section 27-Restraint of trade-Doctrine of-Test
of reasonablenes~ommercial agreement~Applicability to-Condition
restricting the 1ight of the franchisee to deal with competing goods-To
facilitate distribution of goods of the franchisee-Held, cannot be regarded as
D restraint of trade.
Specific Relief Act, 1963-Sections 4l(e) & 42-lnjunction-Grant
of-Enforcement of negafive covenant-Held, relief discretionary-Plea of
burdensome contract-Not valid defence.
E
Civil Procedure Code. 1908-0rder 39 Rules I and 2-Principles of
grant of injunction-Held, conduct of parties a relevant consideration-Parties
to show that they are not fault as relief is equitable.
Interlocutory Injunction-Discretionary remed;-Tests for grant of
F
The Appellant Company (GBC) fully owned and controlled by
respondents nos. 2-4 and 7 and their respective family members and
situated in Ahmedabad and Rajkot in Gujarat were engaged in the
preparation bottling, sale and distribution of beverages registered under
the trade marks "Thoms Up" "Limca", "Gold Spot", "Maaza", "Citra", "Rim
G Zim" and "Bislerie Club Soda" under Iic~nse from the Parle group of
companies, the registered owners of the said trade marks. The Parle group
of companies was owned and controlled by Respondent Nos. 3 and 4.
Coca Cola company (respondent No.1) in anticipation of an assign·
ment of rights in the trade marks for the aforesaid beverages by the
H registered owners viz., Parle group, executed an agreement on 20.9.93 with
514
GUJ. BOTILING CO.LTD. v. COCA COLA CO.
515
GBC agreeing to grant a license to GBC for the use of the trade marks in A
respect of the beverages mentioned above. The agreement provided for the
use of the said trademarks by GBC to ensure that such of the trademark
was strictly in accordance with the common law governing user of trade
mark. This agreement permitted and authorized GBC to bottle, sell and
distribute the said beverages under the aforesaid trademarks inter alia on
the following terms: a) GBC will not sell, assign, transfer, pledge,
mortgage, lease, license or in any other way or manner encumber, dispose
of, in whole or in part, the agreement of any interest therein, either directly
or indirectly, not to pass by operation of or in any other manner without
Coca Cola's prior written consent; b) the agreement may be terminated by
either side on giving one year's written notice which period may be reduced
by mutual consent in writing between Coca Cola and GBC; It contained a
negative stipulation that GBC will not manufacture, bottle, sell, deal or
otherwise be concerned with the products, beverages of any other brands
B
c
or trade marks/trade names during the subsistence of the agreement
including the period of one year's notice as contemplated in the agreement. D
The 1993 Agreement came into force on 12.11.93 when the trade marks
were assigned and transferred to Coca Cola. The agreement was to operate
for five years unless terminated earlier. Further under cl.(19) the transfer
of stock, share or interest or other indica of ownership of GBC resulting
in effective transfer of control without the prior express written consent of
Coca Cola was restrained.
E
On 30.4.94 a second agreement was executed between the same
parties wherein Coca Cola was described as a Licenser and GBC as the
Licensee inter alia on the following terms : a) both the parties shaU make
an application to the Registrar of Trade marks under the Trade & MerF
chandise Marks Act, 1958 or any statutory modification thereto or thereof
for the time being in force to procure the registration of the licensee (GBC)
as a registered user of the said trade marks as aforesaid as soon as the
said trade marks are registered and shall sign and execute all such
documents as are reasonably proper

## Text

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A
MIS. GUJARAT BOTTLING COMPANY LTD. AND ORS.
v.
THE COCA COLA CO. AND ORS.
AUGUST 4, 1995
B
[S.C. AGRAWAL ANDS. SAGHIR AHMAD, JJ.]
Trade and Merchandise Marks Act/Trade and Merchandise Marks
Rules 1958-Section 49/Rule 83-Trade Mark-Registration ofuser-Statut01y
requirement~Implications of Common law-Licensing-Restriction on
C
usage.
Indian Contract Act, Section 27-Restraint of trade-Doctrine of-Test
of reasonablenes~ommercial agreement~Applicability to-Condition
restricting the 1ight of the franchisee to deal with competing goods-To
facilitate distribution of goods of the franchisee-Held, cannot be regarded as
D restraint of trade.
Specific Relief Act, 1963-Sections 4l(e) & 42-lnjunction-Grant
of-Enforcement of negafive covenant-Held, relief discretionary-Plea of
burdensome contract-Not valid defence.
E
Civil Procedure Code. 1908-0rder 39 Rules I and 2-Principles of
grant of injunction-Held, conduct of parties a relevant consideration-Parties
to show that they are not fault as relief is equitable.
Interlocutory Injunction-Discretionary remed;-Tests for grant of
F
The Appellant Company (GBC) fully owned and controlled by
respondents nos. 2-4 and 7 and their respective family members and
situated in Ahmedabad and Rajkot in Gujarat were engaged in the
preparation bottling, sale and distribution of beverages registered under
the trade marks "Thoms Up" "Limca", "Gold Spot", "Maaza", "Citra", "Rim
G Zim" and "Bislerie Club Soda" under Iic~nse from the Parle group of
companies, the registered owners of the said trade marks. The Parle group
of companies was owned and controlled by Respondent Nos. 3 and 4.
Coca Cola company (respondent No.1) in anticipation of an assign·
ment of rights in the trade marks for the aforesaid beverages by the
H registered owners viz., Parle group, executed an agreement on 20.9.93 with
514
GUJ. BOTILING CO.LTD. v. COCA COLA CO.
515
GBC agreeing to grant a license to GBC for the use of the trade marks in A
respect of the beverages mentioned above. The agreement provided for the
use of the said trademarks by GBC to ensure that such of the trademark
was strictly in accordance with the common law governing user of trade
mark. This agreement permitted and authorized GBC to bottle, sell and
distribute the said beverages under the aforesaid trademarks inter alia on
the following terms: a) GBC will not sell, assign, transfer, pledge,
mortgage, lease, license or in any other way or manner encumber, dispose
of, in whole or in part, the agreement of any interest therein, either directly
or indirectly, not to pass by operation of or in any other manner without
Coca Cola's prior written consent; b) the agreement may be terminated by
either side on giving one year's written notice which period may be reduced
by mutual consent in writing between Coca Cola and GBC; It contained a
negative stipulation that GBC will not manufacture, bottle, sell, deal or
otherwise be concerned with the products, beverages of any other brands
B
c
or trade marks/trade names during the subsistence of the agreement
including the period of one year's notice as contemplated in the agreement. D
The 1993 Agreement came into force on 12.11.93 when the trade marks
were assigned and transferred to Coca Cola. The agreement was to operate
for five years unless terminated earlier. Further under cl.(19) the transfer
of stock, share or interest or other indica of ownership of GBC resulting
in effective transfer of control without the prior express written consent of
Coca Cola was restrained.
E
On 30.4.94 a second agreement was executed between the same
parties wherein Coca Cola was described as a Licenser and GBC as the
Licensee inter alia on the following terms : a) both the parties shaU make
an application to the Registrar of Trade marks under the Trade & MerF
chandise Marks Act, 1958 or any statutory modification thereto or thereof
for the time being in force to procure the registration of the licensee (GBC)
as a registered user of the said trade marks as aforesaid as soon as the
said trade marks are registered and shall sign and execute all such
documents as are reasonably proper and necessary to secure registration
and for any change thereof in the future; b) the agreement shall continue G
in force without limit of any period but may be terminated at any time by
either party upon giving 90 days notice in writing to the other by mutual
consent. But in the event of either committing a breach it may be terminated on thirty days' notice. This agreement was a statutory agreement
executed in compliance with the requirements of the Trade & Merchandise H
•516
SUPREME COURT REPORTS [1995] SUPP. 2S.C~R.
A
Marks Act and the rules framed thereunder for the registration of GBC
as the registered user of the trademarks.
B
c
After the aforesaid agreements GBC took steps to upgrade their
plant and when Coca Cola insisted on some additional investments GBC
was reluctant and thereafter respondent No. 2 applied to Coca Cola for its
consent to a transfer of its interest in GBC. Coca Cola refused to give its
consent in the absence of any intimation as to the identity of the prospective buyer and informed them that the transfer can be permitted provided
GBC does not lose controlling power or management in favour of an
outsider.
On 20.1.95 the share holding of respondents 2-4 and 7 including that
of their family members were transferred to appellants 2 to 5, concerns
closely associated and connected or affiliated to subsidiaries of Pepsi
(respondent no 2 to 6) as a result of which Pepsi acquired a controlling
interest in GBC. There after GBC terminated both the agreements with
D Coca Cola by a notice issued under clause 7 of the 1994 agreement, on
25.1.95. It was also stated by GBC that the 1993 agreement stood replaced
by 1994 agreement and in any even since the period of termination has been
reduced to 30 days notice the notice also be treatecJ_ ~i·~~f,~i~~tl~~ ~nderthe
1993 agreement. On the same day GBC informed Coca Cola that 70.6% of
E
the holding have been transferred in favour of Respondents 2 to 5.
Immediately thereafter GBC made an application to the Ministry of
Food Processing Industries for approval of crown cap designs pertaining
to beverages of which the Trademarks were held by Pepsi.
F
Coca Cola filed a suit in the Bombay High Court seeking various
reliefs and also took out a notice of motion seeking interim relief. The
Single Judge who heard the matter, issued an interim injunction restraining GBC from manufacturing, bottling or selling or dealing with the
products, beverages of any brand or trade mark owned by respondent nos.
5 and 6 or any one else other than Coca Cola. GBC was permitted to
G pursue its application pending before the Ministry of Food Processing
Industries but was not allowed to act upon the permission of the said
authority or any other authority without the prior leave of the court. This
order was assailed by both GBC .and Coca Cola before a Division Bench.
At the request of the counsel of the parties the notice of motion was taken
H on board and decided finally by the Division Bench.
GUJ. BOTTLING CO.LTD. v. COCA COLA CO.
517
By the impugned order the notice of motion was made absolute. An A
injunction was granted inter alia :
(a) restraining GBC from either directly or indirectly by itself or
through its shareholders from concerning itself with the products,
beverage of any other brand or trademark of Coca Cola; and
(b) that in the event of the sale of shares having taken place before
B
the institution of the suit, the deponent no. 1 and those to whom the shares
have been sold and subsequent transferees etc. were restrained by an
interim injunction from using the plants of GBC for manufacturing,
bottling or selling or dealing with or concerning themselves in any manner C
whatsoever with the beverages of any person till January 25, 1996.
Aggrieved by the said Judgment, GBC and the four transferees of
the shares preferred appeals to this Court.
It was contended on behalf of the appellants that the negative D
stipulation contained in para 14 of the 1993 agreement being in restraint
of trade is void in view of the provisions of Section 27 of the Contract Act;
that the 1993 agreement is no longer in operation since it has been
superseded by the 1994 agreement and the same has been terminated by
notice dt. 25.1.95 and in the alternative the period of notice for terminating E
the agreement as contained in the 1993 agreement was reduced by mutual
consent from one year to 90 days by the 1994 agreement and the agreement
stands terminated on the expiry of 90 days from the date of said notice;
the observation relating to the doctrine of restraint of trade must be
confined only to contracts of employment and that this principle does not
apply to other contracts; the negative stipulation contained in paragraph F
14 of the 1993 agreement is confined in its application to the preceding
paragraph which means that the said stipulation can be invoked only if
GBC is not able to maintain the continued supply of the products and
beverages to Coca Cola and fails to maintain the Goodwill; that Clause (b)
of paragraph 19 of the 1993 agreement which imposed a restraint in the G
matter of transfer of the shares of GBC is void as transfer of shares of a
company registered under the Companies Act is governed by Section 82 of
the said Act and no restraint can be placed by contract on the said right
to transfer the shares of the company; the High Court was not justified in
law in issuing an interim injunction enforcing the negative stipulation
contained in paragraph 14 of the 1993 agreement, as a result of the said H
518
SUPREME COURT REPORTS [1995) SUPP. 2.S.C.R.
A injunction and discontinuance by Coca Cola if the supply of essence/syrup
and/or other materials by exercising its right under the 1993 agreement,
the plants of GBC would remain idle and a large number of workers who
are employed in those plants would be rendered unemployed and GBC
would be saddled with heavy liabilities loading to its closure thereby
B
c
resulting in irreparable loss which cannot be compensated in the event of
the suit filed by Coca Cola being dismissed; that on the other hand Coca
Cola could not suffer any loss because it had already made alternative
arrangements for supply of its products in area covered by both the
agreement by arranging supply of their products from other licensees in
the neighboring areas that Coca Cola can be adequately compensated for
the loss cause to it by award of damages in the event of it succeeding in
the suit; and that the injunction granted by the High Court is in very wide
terms.
The Respondents contended that, the negative stipulation is apD plicable to the entire para 14 of the 1993 agreement and it should not be
confined to a particular portion only; that Pepsi in taking over GBC took
a calculated risk with full knowledge of the negative covenant and if GBC
is not restrained the goodwill will be destroyed by a rival and damages
would not be an adequate compensation and GBC can be protected by
Coca Cola by furnishing an undertaking under Rule 148 of the Bombay
E
High Court Original side rules; and that since GBC itself is primarily
responsible for breach of the Agreement it cannot seek the vacation of the
interim order.
Dismissing the appeals, this Court
F
HELD : 1. The use of a+egistered trade mark can be permitted to a
registered user in accordance with the provisions of the Trade a~d Merchandise Marks Act and for that purpose the registered proprietor has to
enter into an agreement with the proposed registered t.•ser. The 1994
agreement is a statutory agreement under the Act of 1958 and the rules
G framed thereunder. However, the 1993 agreement is for grant of license in
common law and is much wider in its amplitude and includes terms
regarding the right of the Franchisee in the matter of manufacturing,
bottling etc. The 1994 agreement cannot be construed as superseding the
1993 agreement and the Cou~ below have rightly rejected such a contenH tion. (537-C-D-F]
..
GUJ.BOTILINGCO.LID. v. COCACOLACO.
519
General Election Co. v. General Electric Co. Ltd., [1972] All ER 507, A
referred to.
P. Narayanan - Law of Trade Marks and Passing off 4th Ed., Para 20.6,
p. 335, referred to.
2. Since the nature and scope of the two agreement are different the
1994 agreement cannot be construed as having modified the termination
period given in the 1993 agreement. There is no consensus ad idem between
the parties to reduce the termination period. Hence, the 1993 agreement
can be terminated only by given a notice of one year as required in the
agreement. [538-B-DJ
B
c
3. The condition restricting the right of franchisee to deal with
competing goods is for facilitating the distribution of the goods of the
franchiser and it cannot be regarded as one in restraint of trade. Since the
negative stipulation in the 1993 agreement is confined to the period of
subsistence of the agreement it cannot be held to be in restraint of trade D
so as to attract the bar of sec. 27 of the Contract Act. [545-C, 547-B]
N.S. GoJikari v. Century Spinning Co., [1967) 2 SCR 378 Superintendent Company of India v. Krishan Murgai, [1980) 3 SCR 1278, referred to.
Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd., (1968)
E
AC 269, Attorney General of the Commonwealth of Australia v. Adelaide
Steamship Co. Ltd., [1913) AC 781; McE/listrim v. Ballymacelligott Cooperative Agricultural And Dairy Society Ltd, [1919) AC 548; Herbert Morris
Ltd. v. Saxelby, [1916) 1 AC 688 and Petrofina (Great Britain) Ltd. v. Martin,
. [1966) Ch. 146, referred to.
F
Halsbury's Laws of England, 4th Edn., Vol. 47 paras 9 to 26, referred
to.
4. There is no basis for confining the doctrine of restraint of trade to
a contract for employment and excluding its application to other contracts. G
The underlying principle governing contracts in restraint of trade is the
same in both the contract of employment in and other contracts. [546-E]
5. The negative stipulation contained in the 1993 Agreement is to
promote the trade and it seeks to achieve the said purpose by requiring
GBC to wholeheartedly apply to promoting the sale of the products of Coca H
520
SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R..
A
Cola. Further, the operation of the same is only during the subsistence of
the Contract. [545-E-F]
B
c
6. The negative stipulation contained in para 14 of the 1993 agreement is applicable to all the sub-paragraphs preceding the same and the
purpose of the negative stipulation is to promote and solicit the products
of GBC produced under the trademarks of Coca Cola. [545-D]
7. Cl.(b) of para 19 cannot be held to mean placing restriction on
the right of the shareholders from alienating their shares in GBC. It is
between GBC and Coca Cola inter se and it does not have any binding force
on other shareholders. It only means that in the event of effective transfer
()
of control of GBC by its shareholders in addition to their right to cancel
their agreement Coca Cola has been given a right to discontinue the supply
of materials to GBC. [549-F·G]
V.B. Rangraj v. V.B. Gopalakrishnan & Ors., [1992) 1 SCC 160,
D distinguished.
E
F
G
8. The relief of injunction is wholly equitable in nature and the party
invoking the same has to show that he himself was not at fault and that
he himself was not responsible for bringing about the state of things
complained of and that he was not unfair or inequitable in his dealings
with the party against whom he was seeking relief. These considerations
are. equally applicable to the party approaching the court for vacating the
order of injunction. [554-C-D]
M/s. Lalbhai Dalpatbhai & Co. v. Chittaranjan Chandulal Pandya, AIR
(1966) Guj. 189, Modem Food Industries India Ltd. v. M/s. Shri Krishna
Bottlers (P) Ltd., AIR (1984) Delhi 119 and Wander Ltd. & Anr. v. Antox
India P. Ltd., [1990) Supp. SCC 727, referred to:
Ehrinan v. B01tholomew, (1927) W.N. 233, American Cynamid Co. v.
Ethicon Ltd., [1975) AC 396, referred to.
Chitty on Contracts, 27th Edn., Vol. I, General Principles, para 27-040;
Halsbury's Laws of England, 4th Edn. vol. 24, para 992, referred to.
9. The relief of injunction is granted to protect the plaintiff against
injury by violation of his right for which he could not be adequately
H compensated in damages recoverable in the action if the uncertainty were
..
GUJ. BOTfLING CO. LTD. v. COCA COLA CO. [S.C. AGRA WAL, J.] 521
resolved in his favour at the trial. In order to protect the defendant the A
Court can require the Plaintiff to furnish an undertaking so that the
defendant can be adequately compensated if the uncertainty were resolved
in his favour at the trial. Coca Cola has made out a prima-facie case for
grant of injunction. The loss that may be caused to GBC as a result of
grant of injunction can be assessed and GBC may be compensated by B
award of damages. GBC would be protected by the undertaking that is
required to be given by Coca Cola under Rule 148 of the Bombay High
Court (original side) Rules, 1980. [551-F-H; 553-D-E]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6839-40
of 1995.
C
From the Judgment and Order dated 31.3.95 of the Bombay High
Court in A Nos. 183 & 191/95 in Notice of Motion No. 316/95 in Suit No.
400of1995.
Shanti Bhushan, Gopal Subramaniam, Aron Jetley, F.S. Nariman, D
T.R. Andhyarujina, Anil B. Divan, Harish N. Salve, K.K. Venugopal, A
Sitalwad, Hemant Sahai, Amit Kapur, Ashok Grover, P.S. Shroff, Sunil
Dogra, Dinyar Madan, Ramji Srinivasan, Ms. Monica .Sharma. S.S. Shroff
S.V. Thakore, B.V. Desai, Prasant Patnaik, C.L. Sareen, R.C. Lohli, Ms.
Indu Malhotra and Ms. Aysha Khatri for the appearing parties.
E
The Judgment of the Court was delivered by
S.C. AGRAWAL, J. Special leave granted.
In the past nations often went to war for the protection and advanF
cement of their economic interests. Things have changed now. Under the
international order envisaged by the Charter of the United Nations war is
no longer an instrument of State policy. Now-a-days there are wars between
corporations; more particularly corporations having multi-national operations, for the protection and advancement of their economic interests. G
These wars are fought on the economic plane but some of the battles spill
over to courts of law. The present case is one such legal battle. The
combatants are two American multi-national corporations dominating the
soft drink market having operations in a number of countries. On the one
side is Coca Cola Company (respondent No.1), hereinafter referred to as
"Coca Cola", and on the other side is PEPSICO INC. (for short "Pepsi"), H
522
SUPREME COURT REPORTS [1995] SUPP. 2S.C.R.
A
and its subsidiaries and subsidiaries of the subsidiaries which are under,
direct or indirect, control of Pepsi. There is a long history of trade rivalry
between these two multi-national corporations.
B
Coca Cola had been operating in this country till 1977 when on
account of change of policy of the new Government Coca Cola had to
close its operations in India. After the departure of Coca Cola the products
of the domestic manufactures filled the vacuum. A substantial share of the
market came to be controlled by the Parle group of companies oWlled and
controlled by Mr. Ramesh Chauhan and Mr. Prakash Chauhan, respondents Nos. 3 and 4. The said group was manufacturing under trade marks
C bearing the names "Gold Spot", "Thums Up", "Limca", "Maaza", "Rim Zim"
and "Citra" as well as "Bisleri" club soda. They had arrangements with
bottlers in different parts of the country where under the bottlers prepared
beverages from the essence/syrup supplied by the Parle group and after
bottling the same the beverages were sold under the names for which trade
D marks were held by the Parle group. In late 1980s Pepsi started operations
in India and introduced beverages under their trade marks. Coca Cola
followed suit thereafter. Under the Deed of Assignment dated November
12, 1993, the Parle group assigned their trade marks in the beverages
bearing the names "Gold Spot", "Thums Up" , "Limca", "Maaza", "Rim Zim"
and "Citra" to Coca Cola. On January 6, 1994, Coca Cola applied to the
E
Registrar of Trade Marks for being recorded as subsequent proprietor of
the trade marks which had been assigned to it by the various Parle entities.
Gujarat Bottling Company Ltd., appellant No. 1 {hereinafter referred
to as 'GBC) is a company incorporated under the Companies Act, 1956.
F
21 % of its shares are held by Ahmedabad Advertising· and Marketing
Consultants Ltd., respondent No. 7. The remaining 79% of shares were
held by Mr. Pinakin K. Shah, respondent No. 2 and his family members
and business associates and respondents Nos. 3 and 4 and their family
members and associates in the ratio of 78% and 22% respectively. The
shares of respondent No. 7 were also held by respondent No. 2 and his
G family members and associates and respondent No. 3 and 4 and their family
members and associates in the same ratio of 78% and 22% respectively.
GBC has bottling plants at Ahmedabad and Rajkot in Gujarat. GBC was
having an arrangement with respondents Nos. 3 nd 4 whereunder licence
had been given to GBC to prepare, bottle, sell and distribute beverages
H under the trade marks "Thums Up", "Limca", "Gold Spot", "Maaza", "Citra",
. ......
...
UUJ.BOTfLINGCO.LTD. v. COCA COLA CO. [S.C.AGRAWAL,J.) 523
"Rim Zim" and "Bisleri Club Soda". In anticipation of the assignment of the A
rights in trade marks by parle group in its favour, Coca Cola, on September
20, 1993, entered into an agreement (hereinafter referred to as the "1993
Agreement") with GBC whereby Coca Cola permitted and authorised -
GBC, upon the terms contained in the said agreement, to bottle, sell and
distribute the beverages known and sold under the trade marks "Gold B
Spot", "Thums Up", "Limca", "Maaza" and "Rim Zim". The trade mark
"Citra" was excluded from this agreement for the reason that a suit for
'passing off' was pending against the Parle entity concerned in the Delhi
High Court and there was uncertainty of the outcome of this litigation. The
1993 Agreement was to come into effect on the date Coca Cola indicated C
in writing to GBC that all trade marks related to the said agreement have
been assigned and transferred to Coca Cola. The 1993 Agreement is to -
operate till November 17, 1998 unless earlier terminated as provided in the
said agreement. Under Paragraphs 4(a), 6, 18, 19, 20 and 23 Coca Cola is
empowered to terminate the said agreement without notice and in paragraph 21 provisions is made for termination of the said agreement by either D
side on giving one year's written notice. The said period of notice could be
reduced by mutual consent in writing between Coca Cola and GBC.
Paragraph 14 of the 1993 Agreement contains a negative covenant by GBC
not to manufacture, bottle, sell, deal or otherwise be concerned with the
products, beverages of any other brands or trade marks/trade names during E
the subsistence of the agreement including the period of one years' notice
as contemplated in paragraph 21. Under paragraph 19 Coca Cola has the
right to dis-continue supply to GBC with essence/syrup and/or othe!
materials on the happening of any of the events mentioned in clauses (a)
to ( e) of the said paragraph. Clause (b) of paragraph 19 relates to transfer
of stock, share or interest or other indicia of ownership of GBC resulting F
in effective transfer of control without the prior express written consent of
Coca Cola. The 1993 agreement came into force on November 12, 1993
when the trade niarks related to the said agreement were assigned and
transferred to Coca Cola. Two such agreements were executed - one
pertaining to Ahmedabad town and other pertaining to Rajkot town. In G
petition, Coca Cola also entered into two separate agreements under
letters dated September 20, 1993 in respect of permission to use the trade
mark "Citra" by GBC for Ahmedabad and Rajkot towns. Two other
separate agreements were entered by Coca Cola under letters dated September 20, 1993 for Ahmedabad and Rajkot towns for the use of the trade H
524
SUPREME COURT REPORTS [1995) SUPP. 2S.C.R.
~ -
A
mark "Bisleri" club soda by GBC. All these four letters agreements are
operative for two years and can be renewed by mutual consent. These
agreements can be ten.ninated by giving three months notice by either side.
These agreements were also to come into effect from the date indicated by
Coca Cola in writing to GBC that all trade marks related to the said
B
agreements have been assigned and transferred to Coca Cola.
On April 30, 1994 Coca Cola entered into another agreement
(hereinafter referred to as the "1994 Agreement") with GBC whereby Coca
Cola granted to GBC a non-exclusive licence to use the trade marks
mentioned in the schedule to the agreement, namely, "Gold Spot", "Lim ca",
c ''Thums Up", "Maaza", "Citra", etc, in relation to goods prepared by or for
the licensee (GBC) from concentrates and/or syrup supplied by the licensor (Coca Cola) and packaged or dispensed in accordance with standards,
specifications, formulae processes and instruction furnished or approved
...
by the licensor from time to time and only so long as such goods are
D manufactured within such territory of India and sold within such territory
of India and in such bottles or other containers as shall be approved by
the licensor from time to time. In the said agreement it is provided that
both the parties shall make application to the Registrar of Trade Marks
~
under the Trade & Merchandise Marks Act, 1958 (hereinafter referred to
as "the Act') or any statutory modification or enactment thereto or thereof
E
for the time being in force to procure the registration of the Licensee
(GBC) as a registered user of the said trade marks as aforesaid as soon as
the said trade marks are registered and shall sign and execute all such
documents as are reasonably proper and necessary to secure such registration and for any change thereof in the future. The said agreement is not
F
limited to any particular period and is to continue in force without limitation of period but can be terminated at any time by either party upon giving
ninety days' notice in writing to the other or by mutual consent. But in the
event of either party committing a breach of any of the provisions of the
....
said agreement it shall be lawful for the other party, by giving thirty days'
notice in writing, to terminate the agreement. In accordance with the 1994
G Agreement an application was submitted by Coca Cola on July 12, 1994
under Section 48 and 49 of the Act to register the said agreement as a
Registered User Agreement.
After the execution of these agreements steps for upgradation of the
H plants of GBC at Ahmedabad and Rajkot were taken and when the
GUJ.BOTTLINGCO.LID. v. COCACOLACO.(S.C.AGRAWAL,J.] 525
upgradation of the said two plants was near completion Coca Cola advised A
GBC that it was necessary for GBC to provide for additional investments
in marketing arrangements, purchase of crates and other equipments and
trucks etc. GBC was, however, reluctant to make further investment and
respondent No. 2 requested Coca Cola to give its consent in advance for
transfer of interest of respondent No. 2 in GBC. Coca Cola declined to
give its consent to such transfer in advance without being aware as to who
the prospective purchaser was and informed GBC and respondent No. 2
that the transfer can be permitted provided GBC does not lose controlling
power or management in favour of an outsider. On January 20, 1995, the
share holding of respondent No. 2 and his family members and associates
as well as respondent Nos. 3 and 4 and their family members and associates
in GBC and respondent No. 7 were transferred to appellants Nos. 2 to 5
which are concerns closely associated and connected or affiliated to subsidiaries of Pepsi, respondent No. 6, and Pepsi Foods Limited, respondent
No. 5, a subsidiary of Pepsi. As a result Pepsi acquired control over GBC.
B
c
On January 25, 1995 GBC Gave a notice to Coca Cola under clause 7 of D
the 1994 Agreement whereby the said agreement was terminated. In the
said notice it is also stated tha~ without prejudice to the contentions of
GBC that the 1993 Agreement stands replaced by the 1994 Agreement
and/or that the termination period under the 1993 Agreement in any event
stands reduced to 90 days and that the said letter dated January 25, 1995
be treated, as a matter of abundant caution, as termination notice also E
under clause 21of the 1993 Agreement. On January 25, 1995 GBC also
addressed a letter to Coca Cola informing them that shares representing
70.6% approximately of the paid up equity capital of GBC had been
acquired by and transferred in favour of appellants Nos. 2 to 5. On January
31, 1995 GBC addressed a letter to the Director (F&VP), Ministry of Food
Processing Industries, Government of India, for approval of crown cap
designs pertaining to beverages of which the trade marks are held by Pepsi.
On January 30, 1995 Coca Cola filed in suit- (Suit No. 400 of 1995)
F
in the Bombay High Court seeking various reliefs. In the said suit Coca G
Cola took out Notice of Motion No. 316 of 1995 seeking interim relief.
During the course of hearing on the said Notice of Motion before the
learned single Judge of the High Court (Dhanuka J .) the learned counsel
for Coca Cola sought interim relief in terms of prayers (a)(i), (a)(ii) (a)
(iii) and (a) (viii) of the Notice of Motion. By his order dated February 22,
1995 the learned single Judge declined the application for grant of interim H
526
SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.
A
relief in terms of prayers (a)(i), (a)(iii) and (a)(viii) but issued an interim
injunction restraining GBC from manufacturing, bottling or selling or
dealing with the products, beverages of any brand or trade marks owned
by respondents Nos., 5 and 6 or any one else other than Coca Cola. GBC
was permitted to pursue its application dated January 31, 1995 pending
B
c
before the Director (F&VP), Ministry of Food Processing Industries, in
accordance with law but GBC was directed not to act upon the permission
of the said authority or any other authority, if granted, without obtaining
prior leave of the court. Two appeals (Appeals Nos. 183 and 191 of 1995)
were filed against the· said order of the learned single Judge before the
Division Bench of the High Court - one was by GBC and the other was by
Coca Cola. During the course of hearing of the said appeals the parties,
through their counsel, submitted that as decision in the appeals would have .
impact on the Motion pending before the learned single Judge, it was
desirable that Notice of Motion No. 316 of 1995 should be taken up on
board and disposed of finally by the Division Bench so as to avoid one
D more appeal. In view of the said submission and by consent of the parties
the Motion was heard and disposed of finally by the Division Bench by the
impugned judgment dated March 31, 1995. By the said judgment Notice of
Motion No. 316 of 1995 was made absolute in terms of prayer Nos. (a)(ii)
and (a) (iii) as modified. Prayer (a)(ii) was for an injunction restraining
E
F
G
respondent No. 1 (GBC) either directly or indirectly by itself or through
its shareholders from concerning itself with the products, beverages of any
other brand or trade mark of the plaintiffs (Coca Cola). Under prayer
(a)(iii) as modified an injunction has been granted in the following terms:
"That in the event of the sale of shares having taken place before
the institution of the suit, the deponent No. 1 and those to whom
the shares have been sold and also subsequent transferees, their
servants, agents, nominees, employees, subsidiary companies, controlled companies, affiliates or associate companies or any person
acting for and on their behalf are restrained by an interim injunction from using the plants of respondent No. 1 at Ahmedabad and
Rajkot for manufacturing, bottling or selling or dealing with or
concerning themselves in any manner whatsoever with the
beverages of any person till January 25, 1996."
Feeling aggrieved by the said judgment of the Division Bench of the
H High Court dated March 31, 1995, GBC (defendant No.l) and the four
GUJ.BOTILINGCO.LID. v. COCACOLACO.[S.C.AGRAWAL,J.] 527
transferees of the shares of GBC (defendants Nos. 7 to 10) have filed these A
appeals.
By the said interim order the High Court has given effect to the
hegative stipulation contained in paragraph 14 of the 1993 Agreement
which is in the following terms :
"As such the Bottler covenants that the Bottler will not manufacture, bottle, sell, deal or otherwise be concerned with the products,
beverages of any other brands or trade marks/trade names during
the subsistenane of this Agreement including the period of one
B
year's notice as contemplated in paragraph 21."
C
On behalf of the appellants submissions have been made assailing
the validity of the said negative covenant. For that purpose it is necessary
to determine whether the 1993 Agreement subsists or has been legally
terminated. The case of GBC, in this regard, is that the 1993 Agreement
is no longer in operation since it has been superseded by the 1994 AgreeD
ment and the 1994 Agreement has been terminated by notice dated January
25, 1995 and that, in the alternative, the requirement regarding giving of
one year's written notice for terminating the 1993 Agreement as contained
in paragraph 21 of the said agreement was reduced by mutual consent by
the parties by the 1994 Agreement wherein under clause 7 the period of E
such notice for terminating the agreement is 90 days and that by notice
dated January 25, 1995 the 1993 Agreement stands terminated on the
expiry of 90 days from the date of the said notice. These submissions
require an examination of the nature and contents of the 1993 and 1994
Agreements but before we proceed to do so we may briefly refer to the
relevant law governing the use of trade marks in India.
F
The first enactment whereby the machinery for registration and
statutory protection of trade marks was introduced in this country was the
Trade Marks Act, 1940. Prior to the said enactment the law relating to
trade marks in India was based on common law which was substantially the G
same as was applied in England before the passing of the Trade Marks
Registration Act, 1875. At common law the right to property in a trade
mark was in the nature of monopoly enabling the holder of the said right
to restrain other person from using the mark. For being capable of being
the subject matter of property a trade marks had to be distinctive. This
right was an adjunct. of the goodwill of a business and was incapable of H
528
SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.
A
separate existence dissociated from that goodwill. [See : General Election
Co. v. General Electric Co. Ltd., (1972) 2 All ER 507). The Trade Marks
Act, 1940, which was based on the Trade Marks Act, 1938 of U.K., has
now been replaced by the Act. The Act has modified the law relating to
Trade and Merchandise Marks and is a comprehensive piece of legislation
B
c
dealing with the registration and protection of trade marks and criminal
offences relating to trade marks and other markings in merchandise. Under
the Act registration of trade marks is not compulsory and as regards
unregistered trade marks, some aspects are governed by the Act while
others are still based on common law. In respect of a trade mark registered
under the provisions of the Act certain statutory rights have been conferred
on the registered proprietor which enable him to sue for the infringement
of the trade mark irrespective of whether or not mark is used. The Act also
makes provisions whereunder registered proprietor of a trade mark can
permit any person to use the mark as a registered user and for that purpose
provisions are made in Sections 48 to 54 of the Act. In clause (m) of Section
D 2 the expression "permitted use" in relation to a registered trade mark has
been defined to mean "(i) the use of a trade mark by a registered user of
the trade mark in relation to goods - (a) with which he is connected in the
course of trade; and (b) in respect of which the trade mark remains
registered for the time being; and ( c) for which he is registered as
E
registered user; and (ii) which complies with any conditions or restrictions
to which the registration of the trade mark is subject". In sub- section (1)
of Section 48 it is provided that a person other than a registered proprietor
of a trade mark may be registered as the registered user thereof in respect /
of any or all of the goods in respect of which the trade mark is registered
F
otherwise than as a defensive trade mark and in the said Section the
Central Government has been empowered to make rules providing that no
application for registration as such shall be entertained unless the agreement between the parties complies with the conditions laid down in the
rules for preventing trafficking in trade marks. Under sub-section (2) the
permitted use of a trade mark shall be deemed to be used by the proprietor
G thereof and shall be deemed not to be used by a person other than the
proprietor, for the purpose of Section 46 or for any other purpose for
which such use is material under the Act or any other law. Section 49
makes provision for submission of application for registration of trade
mark as a registered user and one of the requirements is that the said
H
aJ?plication shall be accompanied by the agreement in writing or a duly
GUJ.BOTfLINGCO.LTD. v. COCACOLACO.[S.C.AGRAWAL,J.) 529
authenticated copy thereof entered into between the registered proprietor A
and the proposed registered user with respect to permitted use of the trade
mark and it is further required that the registered proprietor or some
person authorised to the satisfaction of the Registrar to act on his behalf
give an affidavit in respect of the matters set out in sub-clauses (a) to (d)
of clause (ii) of sub-section (1) of Section 49. Section 51 empowers a B
registered user of a trade mark to call upon the proprietor to take proceeding to prevent infringement of the trade mark and if the proprietor refuses
or neglects to do so within three months after being so called upon, the
registered user may institute proceedings for infringement in his own name
as if he were the proprietor, making the proprietor a defendant. Section
52 deals with power of Registrar to very or cancel registration as registered C
user. Under Section 53 a registered user does not have the right of
assignment or transmission of the right to use the trade mark. Further
provisions relating to registered user are contained in chapter V (Rules 82
to 93) of the Trade and Merchandise Marks Rules, 1959 (hereinafter
referred to as "the Rules"). Rules 83 provides the particulars which are D
required to be stated in the agreement between the registered proprietor
and the proposed registered user with respect to the permitted use of the
trade mark.
The said particulars include "the particulars specified in
sub-clauses (a) to (d) of clause (ii) of sub-section (1) of Section 49" and a
provision about "means for bringing the permitted use to an end when the
relationship between the parties or the control by the registered proprietor E
over the permitted user ceases."
The above mentioned provisions contained in the Act and the Rules
indicate that the use of registered trade mark by a registered user is subject
to fulfilment of certain conditions and for the purpose of registration of a F
registered user it is necessary for the registered proprietor of the trade
mark and the proposed registered user to execute an agreement which
must contain the prescribed particulars and must be submitted alongwith
the application for registration as a registered user.